Hubbard Industries is an all-equity firm whose shares have an expected return of 10.9%. Hubbard does a
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Hubbard Industries is an all-equity firm whose shares have an expected return of 10.9%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debtequity ratio is 0.66. Due to the increased risk, shareholders now expect a return of 17.1%. Assuming there are no taxes and Hubbard’s debt is risk-free, what is the interest rate on the debt?
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Related Book For 
Corporate Finance The Core
ISBN: 9781292158334
4th Global Edition
Authors: Jonathan Berk, Peter DeMarzo
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